Investment holding company Labat Africa, which is seeking to entrench its presence in the cannabis market, plans to raise capital for the expansion of its medical cannabis business, it said on Tuesday.

Labat, which in 2019 became the first listed company in Africa to venture into cannabis, is strengthening its foothold in the industry estimated to be worth R27bn.

Labat CEO Brian van Rooyen said the company will issue 150-million shares for cash to institutional and other investors, which would enable it to fund the expansion of its health-care operations.

Labat’s shares are trading at 39c, with a market capitalisation of R152m. The stock has lost 4.88% so far in 2020.

The company said it was in talks with high-profile investors, particularly in the US and the UK, without mentioning who those investors were. It also did not mention how much it plans to raise.

Van Rooyen said they were exploring new opportunities around the world. He said while the coronavirus and the recent downgrade of SA’s economy by Moody’s Investors Service were on the minds of investors, the company managed to attract the attention of investors in the US who have shown interest in its cannabis business.

“Like us, they are thinking ahead and positioning to take advantage of the opportunities that will open up when our economies are reopened, and there are encouraging signs this may happen soon,” said Van Rooyen.

In the company’s results statement on Tuesday, Labat said in its 25 years of existence it had never faced a challenge of the magnitude presented by the pandemic. While all its businesses were being affected, its Force Fuel group was being hardest hit, it said.

The company’s revenue for the six months to end-February dropped by R93m  to R219m from R312m in the same period a year earlier.

Operating profit rose to R7.7m in 2020 from R504,000 due to the once-off recognition of investment in the group’s health-care business, as well as the revaluation of property plant and equipment as other income of R14.6m.

The coronavirus outbreak has led to the company withdrawing  its five-year profit guidance. It will be issuing new forecasts for its 2021 and 2022 financial years.

Labat began its move into the fast-expanding cannabis industry in 2019 and has since gone on to buy companies engaged in various sectors of the industry.

These include its acquisition of cannabis grower and manufacturer Zarenka in Lesotho and a 70% interest in Biodata, a medical research firm that was initially set up as a holistic healing enterprise incorporating cannabinoids. Labat has shares in a packaging company, Pac-Con, which specialises in manufacturing and packaging liquids, tablets, capsules, creams and gels.

Labat also bought a company that offers training and education for cannabis production for R15m. It will be known as CannAfrica.

thukwanan@businesslive.co.za